Feds to Rescue: Funds for Growers to Plant and Transport Biofeedstock

The government has long subsidized transportation fuels, including new types of fuels that use renewable feedstock such as plants and agricultural wastes. In its latest move to support production of biofuels, the U.S. Department of Agriculture on Thursday said it will pay farmers and landowners to grow and transport crops and other feedstock to refineries.

Agricultural Secretary Tom Vilsack announced the start of the Biomass Crop Assistant Program (BCAP), which is a product of the Food, Conservation, and Energy Act of 2008 and aims to promote the use of plants and biomass that can’t be used for food or animal feed. The USDA started running part of the program as a pilot in 2009 while it finalized the rule for the program. The agency announced the final rule on Thursday.

The law passed at a time of a huge debate within the U.S. and abroad about the impact of an increased use of corn for producing ethanol. Critics contended that government incentives for corn ethanol prompted farmers to plant corn instead of other crops, and that resulted in higher prices for food and animal feed. The U.S. government has set a goal of boosting the production of a variety of biofuels to 36 billion gallons by 2022.

The BCAP will pay growers or forest land owners up to 75 percent of the cost of establishing eligible perennial crops. The subsidy is necessary because it could take a few years before newly planted energy crops are ready for harvesting, the USDA said. The producers also can get annual payments for up to five years for grassy crops and up to 15 years for woody crops. Eligible crops include switchgrass, miscanthus, jatropha, algae and pongamia. The amount of payments depend on the use the crops, whether they are for cellulosic biofuel or heat and electricity, for example. Crops for cellulosic biofuel can get fetch more government subsidies than other uses.

The USDA also will provide matching funds for up to $45 per ton for crop owners to transport them to refineries or other facilities for converting the feedstocks into fuels, heat, electricity or other products. The matching fund will last two years per grower/land owner. The government expects to spend $461 million on the BCAP over 15 years.

Biofuel producers have struggled in recent years as they try to overcome technical challenges for growing and converting crops into fuels. The recession also has made it difficult for them to raise the millions of dollars needed to build product facilities. Last year, the Department of Energy announced nearly $800 million in funding for biofuel producers to research and build refineries.

Private equity investors have continued to pump money into startups developing novel processes of using algae, seaweed and engineered microbes to produce fuels (here is our list of 15 algae fuel startups you need to know). A few companies, such as Gevo and Amyris Biotechnologies, filed papers to go public this year. Amyris went public on the NASDAQ last month.

The USDA on Thursday also announced a 5-year agreement with the Federal Aviation Administration to figure out ways to speed up the production of biofuels for flying planes. Both agencies already have their own programs for promoting the development of jet fuels from biomass. The agreement will prompt them to work closely on identifying the feedstock and methods for commercializing biofuels for jets.

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